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The month of June can be vital for investors owing to various reasons, starting from uncertainty regarding Fed rate cuts to an unseasonal equity investing pattern. A consensus carried out from 1950 to 2023 shows that June ended up offering positive stock returns in 39 years and negative returns in 35 years, per moneychimp.com, with an average return of negative 0.04%.
Will We Have a Fed Rate Cut Soon?
There is now a 55.3% probability of a 25-bp Fed rate cut in September, as per the CME Fedwatch Tool, up from 51.3% recorded on Jun 3, 2024. Inflation, which resumed its climb in the first quarter of 2024, is finally showing signs of cooling.
The Commerce Department said that personal consumption expenditure (PCE), the Fed’s favorite inflation gauge, increased just 0.3% sequentially in April, unchanged from March’s rise and in line with the consensus estimate. Core PCE rose 0.2% sequentially, lower than March’s rise of 0.3% and the consensus estimate of a 0.3% rise.
Also, the manufacturing sector slowed further in May. The ISM Manufacturing PMI fell to 48.7% in May from 49.2% in April, indicating that the economy is slowing. This demands the Fed policy to be accommodative. Signs of a slowing economy and easing inflation have raised hopes of a Fed rate cut in the near term.
AI Innovation Keeps Tech Space Hot
Innovation is essential for a company to remain relevant and expand market share. NVIDIA (NVDA - Free Report) indicates this positive trend, with its advancements in artificial intelligence (AI) propelling its stock and putting it under the spotlight. NVIDIA’s move acted as a cornerstone for the entire industry as companies like Advanced Micro Devices (AMD - Free Report) and Intel (INTC - Free Report) have also been introducing new-gen AI chips. Hence, investors are less likely to take their eyes off AI and chips.
Against this backdrop, we highlight a few ETF options that can come across as intriguing bets for the month.
The space is busy with activities. AMD has about 7.23% exposure to SHOC, while NVDA has about 31%. The underlying Solactive United States Semiconductors 30 Capped Index measures the performance of the 30 largest U.S. companies in the U.S. semiconductor sector. The Zacks Rank #2 (Buy) fund charges 40 bps in fees (read: 4 ETF Areas Hovering Around 52-Week Highs).
The space is likely to benefit from both likely lower interest rates and the high energy requirement due to the AI boom. The Utilities Select Sector Index seeks to provide an effective representation of the Utilities sector of the S&P 500 Index. The fund charges 9 bps in fees (read: More S&P 500 Rally in the Cards? ETFs to Gain).
An exposure to the dividend aristocrats is great as these investments are less volatile. The underlying S&P 500 Dividend Aristocrats Index targets companies that are currently members of the S&P 500, have increased dividend payments each year for at least 25 years, and meet certain market capitalization & liquidity requirements. The fund charges 35 bps in fees and yields 2.08% annually.
The underlying CME CF Bitcoin Reference Rate New York Variant is a once-a-day benchmark index price for Bitcoin that aggregates trade data from multiple Bitcoin-USD markets operated by major cryptocurrency exchanges. The fund charges 25 bps in fees.
Investors should note that large-cap stocks have wide foreign exposure. Foreign economies are looking up lately, making the case for large-cap investing even stronger. Corporates have been strengthening not only in the United States but also in Europe. As a result, large-cap growth ETFs like SCHG are likely to enjoy some special benefit. The fund follows the Dow Jones U.S. Large-Cap Growth Total Stock Market Index. The fund charges 4 bps in fees.
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5 ETFs to Buy for June
The month of June can be vital for investors owing to various reasons, starting from uncertainty regarding Fed rate cuts to an unseasonal equity investing pattern. A consensus carried out from 1950 to 2023 shows that June ended up offering positive stock returns in 39 years and negative returns in 35 years, per moneychimp.com, with an average return of negative 0.04%.
Will We Have a Fed Rate Cut Soon?
There is now a 55.3% probability of a 25-bp Fed rate cut in September, as per the CME Fedwatch Tool, up from 51.3% recorded on Jun 3, 2024. Inflation, which resumed its climb in the first quarter of 2024, is finally showing signs of cooling.
The Commerce Department said that personal consumption expenditure (PCE), the Fed’s favorite inflation gauge, increased just 0.3% sequentially in April, unchanged from March’s rise and in line with the consensus estimate. Core PCE rose 0.2% sequentially, lower than March’s rise of 0.3% and the consensus estimate of a 0.3% rise.
Also, the manufacturing sector slowed further in May. The ISM Manufacturing PMI fell to 48.7% in May from 49.2% in April, indicating that the economy is slowing. This demands the Fed policy to be accommodative. Signs of a slowing economy and easing inflation have raised hopes of a Fed rate cut in the near term.
AI Innovation Keeps Tech Space Hot
Innovation is essential for a company to remain relevant and expand market share. NVIDIA (NVDA - Free Report) indicates this positive trend, with its advancements in artificial intelligence (AI) propelling its stock and putting it under the spotlight. NVIDIA’s move acted as a cornerstone for the entire industry as companies like Advanced Micro Devices (AMD - Free Report) and Intel (INTC - Free Report) have also been introducing new-gen AI chips. Hence, investors are less likely to take their eyes off AI and chips.
Against this backdrop, we highlight a few ETF options that can come across as intriguing bets for the month.
ETFs in Focus
Strive U.S. Semiconductor ETF (SHOC - Free Report)
The space is busy with activities. AMD has about 7.23% exposure to SHOC, while NVDA has about 31%. The underlying Solactive United States Semiconductors 30 Capped Index measures the performance of the 30 largest U.S. companies in the U.S. semiconductor sector. The Zacks Rank #2 (Buy) fund charges 40 bps in fees (read: 4 ETF Areas Hovering Around 52-Week Highs).
Utilities Select Sector SPDR ETF (XLU - Free Report)
The space is likely to benefit from both likely lower interest rates and the high energy requirement due to the AI boom. The Utilities Select Sector Index seeks to provide an effective representation of the Utilities sector of the S&P 500 Index. The fund charges 9 bps in fees (read: More S&P 500 Rally in the Cards? ETFs to Gain).
ProShares S&P 500 Dividend Aristocrats ETF (NOBL - Free Report)
An exposure to the dividend aristocrats is great as these investments are less volatile. The underlying S&P 500 Dividend Aristocrats Index targets companies that are currently members of the S&P 500, have increased dividend payments each year for at least 25 years, and meet certain market capitalization & liquidity requirements. The fund charges 35 bps in fees and yields 2.08% annually.
iShares Bitcoin Trust Registered (IBIT - Free Report)
Bitcoin breached the $71,000 level, reflecting greater confidence in global markets about the prospect of Fed rate cut this year. The largest digital asset’s run of daily increases now has become the longest in three months. The asset is not far from its all-time high now.
The underlying CME CF Bitcoin Reference Rate New York Variant is a once-a-day benchmark index price for Bitcoin that aggregates trade data from multiple Bitcoin-USD markets operated by major cryptocurrency exchanges. The fund charges 25 bps in fees.
Schwab U.S. Large-Cap Growth ETF (SCHG - Free Report)
Investors should note that large-cap stocks have wide foreign exposure. Foreign economies are looking up lately, making the case for large-cap investing even stronger. Corporates have been strengthening not only in the United States but also in Europe. As a result, large-cap growth ETFs like SCHG are likely to enjoy some special benefit. The fund follows the Dow Jones U.S. Large-Cap Growth Total Stock Market Index. The fund charges 4 bps in fees.